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Tens of billions in funds may flow out of Israel within the next three years as a result of the country's limited local market, the country's big investment and insurance houses warned on Sunday.
As power shifts from the banks to insurance companies as a result of the sale of mutual and provident funds to insurance companies, the market will be sitting on a NIS 250 billion liquid investment portfolio, professionals said at an investment conference organized by The Marker and Tamir Fishman.
"It will be difficult for us to stay in the local market. Twenty percent of our portfolio will be invested in global markets and I believe that this trend will grow to 25% and more within the next [few] years," said Eitan Levi, Investment manager at Phoenix, in panel discussion.
Tamir Porat, head of investment management at Clal Finance Bitucha, meanwhile, estimated that the firm would shift 30% to 35% of its portfolio abroad by 2008.
Speaking separately at Sunday's conference in Tel Aviv, Labor Party Chairman Amir Peretz said he had plans to help bring global funds into Israel.
"Israel has not been exposed to the global pension funds market, one of the largest sources of investment. We need to start persuading global pension funds to invest in Israel and I can and will do it," he said.
"I am in favor of a free market economy and 'real' competition but only if such an economy would also serve the other half of the population that is currently not taking part in enjoying the fruits of the labor."
Looking ahead, Phoenix's Levi, provided a positive outlook for the country's financial market.
"The macroeconomic outlook is positive. We are not in a financial bubble. I don't think we will see abrupt increases in Israel's stock market in 2006 - but rather a 5% to 10% increase."
And Porat pointed to the continued attractiveness of the Israeli stock market to foreign investors.
"Foreign investors are not so critical about the Israeli stock market a local investors. 2006 will not be an index year - the name of the game will be stock picking".
Peretz, however, pleaded for a sense of caution regarding the optimism raised at the conference about the state of the country's economy.
"Don't promise that there won't be a financial bubble that might burst," he said.